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Interpreting procyclical productivity: evidence from a cross-nation cross-industry panel

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Author Info

  • J. Bradford DeLong
  • Robert J. Waldmann

Abstract

We use an international panel data set of value added by industry to see if labor productivity is procyclical in response to demand shocks. It is: holding fixed our proxy for supply-side factors - the value added levels of an industry in other nations - industry-level productivity rises when value added in the rest of manufacturing rises. Moreover, increases in unemployment are associated with a lowered degree of procyclicality in Europe. This suggests that procyclical productivity arises primarily from "labor hoarding" by firms in the U.S. that wish to avoid future training costs and primarily from "job hoarding" by workers in Europe who wish to avoid unemployment.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1997)
Issue (Month): ()
Pages: 33-52

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Handle: RePEc:fip:fedfer:y:1997:p:33-52:n:1

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Related research

Keywords: Labor productivity ; Unemployment;

References

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  1. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," NBER Working Papers 2115, National Bureau of Economic Research, Inc.
  2. Layard, Richard Grenville & Nickell, Stephen, 1989. "The Thatcher Miracle?," CEPR Discussion Papers 315, C.E.P.R. Discussion Papers.
  3. Shapiro, Matthew D, 1993. "Cyclical Productivity and the Workweek of Capital," American Economic Review, American Economic Association, vol. 83(2), pages 229-33, May.
  4. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1989. "Building Blocks of Market Clearing Business Cycle Models," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 247-302 National Bureau of Economic Research, Inc.
  5. Alan C. Stockman, 1989. "Sectoral and National Aggregate Disturbances to Industrial Output in Seven European Countries," NBER Working Papers 2313, National Bureau of Economic Research, Inc.
  6. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  7. Robert E. Hall, 1988. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
  8. Julio J. Rotemberg & Lawrence H. Summers, 1988. "Labor Hoarding, Inflexible Prices, and Procyclical Productivity," NBER Working Papers 2591, National Bureau of Economic Research, Inc.
  9. Hamermesh, Daniel S, 1995. "Labour Demand and the," Economic Journal, Royal Economic Society, vol. 105(430), pages 620-34, May.
  10. Aizcorbe, Ana M, 1992. "Procyclical Labour Productivity, Increasing Returns to Labour and Labour Hoarding in Car Assembly Plant Employment," Economic Journal, Royal Economic Society, vol. 102(413), pages 860-73, July.
  11. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
  12. Thor Hultgren, 1960. "Changes in Labor Cost During Cycles in Production and Business," NBER Books, National Bureau of Economic Research, Inc, number hult60-1, October.
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  14. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
  15. Mark Bils & Jang-Ok Cho, 1993. "Cyclical factor utilization," Discussion Paper / Institute for Empirical Macroeconomics 79, Federal Reserve Bank of Minneapolis.
  16. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  17. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  18. Blanchard, Olivier Jean & Summers, Lawrence H, 1988. "Beyond the Natural Rate Hypothesis," American Economic Review, American Economic Association, vol. 78(2), pages 182-87, May.
  19. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  20. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  21. F. J.M. Meyer-zu-Schlochtern, 1988. "An International Sectoral Data Base for Thirteen OECD Countries," OECD Economics Department Working Papers 57, OECD Publishing.
  22. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Cyclical vs Structural Unemployment part N
    by Robert in angry bear on 2010-09-01 23:59:00
  2. Robert Waldmann Predicts a Jobless Recovery too...
    by Brad DeLong in Grasping Reality with the Invisible Hand on 2009-07-23 01:33:00
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Cited by:
  1. Claudiu George BOCEAN, 2012. "Human Resource Compensation In Time Of Crisis," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(2), pages 285-292, November.
  2. Nicoletta Batini & Brian Jackson & Stephen Nickell, 2002. "The Pricing Behaviour of UK Firms," Discussion Papers 09, Monetary Policy Committee Unit, Bank of England.

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